Weaker Dollar and World Share Prices Ahead of Key U.S. Data Releases

August 16, 2016

The dollar fell overnight by 1.3% against the yen (now showing a 99 handle), 1.2% relative to the Swiss franc and kiwi, 1.0% versus the euro (which is near 1.13), 0.9% vis-a-vis sterling (hurt by a rise in British inflation), 0.8% against the Aussie and Canadian dollars, and 0.3% versus the yuan.

Japan’s Nikkei closed down 1.6%. Elsewhere in the Pacific Rim, stocks fell 1.3% in New Zealand, 0.5% in China, 0.4% in Taiwan, and 0.3% in India and Singapore. Losses so far in European trading amount to 0.8% in Switzerland, 0.6% in Germany and Spain, 0.5% in France and Greece, 0.4% in the U.K., and 0.3% in Italy.

Ten-year sovereign debt yields dropped two basis points in Japan and a basis point in Germany. The 10-year Treasury yield in futures trading is lower at 1.53%, but the 10-year British gilt was lifted a basis point after data showed an unforeseen rise in U.K. CPI inflation.

The U.S. Treasury’s monthly released of capital flow data, this time for June, showed deteriorating support for the dollar. There was a net $3.6 billion long-term outflow and a whopping outflow of $202.8 billion during the month of all compiled data including short-term capital movements.

San Francisco Fed President Williams made some dovish remarks.

Britain’s CPI inflation rate rose 0.1 percentage point to 0.6% in July, most since October 2014. Retail price inflation advanced 0.3 percentage points to 1.9%. Producer output price inflation swung from minus 0.2% in June to +0.3% in July, including a 0.3 percentage point acceleration of the core PPI-O induex to 1.0%. Producer input price inflation jumped 3.6% on month in July, resulting in a 4.3% 12-month increase after on-year drops of 0.5% in June, 3.9% in May and 7.0% in April. Sterling depreciation has been a key element behind this rise in inflation. The house price index, formerly compiled by DCLG, accelerated to an 8.7% on-year comparative increase, most in 20 months.

The Germany-based ZEW Institute reported its investor sentiment survey results for the month of August, and they showed a partial recovery from the initial Brexit shock. Regarding investor expectations toward Germany, the index improved to +0.5 in August from -6.8 in July and 19.2 in June. Views on the current situation in Germany registered a better 57.6 reading after 49.8 in July and 54.5 in June. Regarding sentiment toward the euro zone, the expectations index swung to +4.6 in August from -14.7 in July and +20.2 in June, and current conditions had a reading in August of minus 10.3 after -12.4 in July and -10.0 in June.

Euroland’s seasonally adjusted trade surplus in June of EUR 23.4 billion was smaller than forecast and at a 4-month low. Import growth of 1.5% exceeded a 0.5% on-month rise in exports. The unadjusted first-half surplus of EUR 134.5 billion surpassed a surplus of EUR 111.4 billion in the first half of 2015.

Minutes from the Reserve Bank of Australia’s August 2 meeting, which cut the Official Cash Rate to 1.5% have sowed some confusion because they are less dovish than the recently released quarterly Monetary Policy Statement and therefore suggests lower odds of an additional rate cut than investors had been assuming.

Australian motor vehicle sales sank 1.3% in July, cutting their 12-month rate of increase to 1.6% from 2.3%.

Indian wholesale price inflation accelerated more than expected to 3.55% in July from 1.62%. Food and manufacturing components posted larger on-year increases, while energy showed a smaller on-year decline in price.

On-year Czech GDP growth slowed to 2.5% last quarter from 3.0% in the first quarter of 2016.

Scheduled U.S. data releases today feature consumer prices and industrial production and also include housing starts and building permits. Canada’s monthly survey of manufacturing shipments, orders and inventories arrives.

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